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ass08_due102108 - ISE460 Fall 2008 Session 15 Assignment 08...

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ISE460 Fall 2008 Session 15 10/14/08 Assignment 08 Due 10/21/08 Back to team homework No.1 (2 points) Consider the following investment projects: Assume that MARR = 20% in the following questions: (a) Compute i* for each investment. If the problem has more than one i* identify all of them. (b) Compute IRR (true) for each project. (c) Determine the acceptability of each investment. No.2 (2 points) Agdist Corporation distributes agricultural equipment. The board of directors is considering a proposal to establish a facility to manufacture an electronically controlled “intelligent” crop sprayer invented by a professor at a local university. This crop sprayer project would require an investment of $10 million in assets and would produce an annual after-tax net benefit of $2.1 million over a service life of seven years. All costs and benefits are included in these figures. When the project terminates, the net proceeds from the sale of the assets will be $2 million. Compute the rate of return of this project. Is this a good project at MARR = 15%?
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